STUDY UNIT 12 PART 1

Question 1

What is WINDING-UP?

Answer 1

Winding-up means the procedure by which a company’s assets are sold, its debts are paid, and any money left over is divided among the shareholders according to their rights.

Question 2

PROVISIONS REGULATING THE WINDING-UP OF COMPANIES:

Answer 2

1. Sections 79 to 81 of the Companies Act, deals with the winding-up of solvent companies
2. Sections 337-426 of the Companies Act, continues to apply in the liquidation and winding-up of companies
3. Section 339 of the Companies Act

Question 3

MODES OF WINDING-UP:

Answer 3

1. Winding-up by a court also referred to as Compulsory winding-up
2. A voluntary winding-up

Question 4

1. WINDING-UP BY A COURT/ COMPULSORY WINDING-UP:

Answer 4

-is initiated by an application to the court.
The application is usually brought by a creditor in the case of an insolvent company, and a shareholder in the case of a solvent company.

Question 5

2. A VOLUNTARY WINDING-UP:

Answer 5

-is initiated by a special resolution by the shareholders.
the special resolution must state whether the winding-up is to be conducted by the creditors or by the shareholders
Referred to as a members’ voluntary winding-up in an insolvent company {s343(2)} and a voluntary winding-up in a solvent company {s81(1)}

Question 6

WHEN CAN A COMPANY BE WOUND UP BY A COURT:

Answer 6

the grounds for winding-up a company are set out in s344 (insolvent company) and s81(1) of the 2008 Act (solvent company)
THESE GROUNDS INCLUDE:
1. Special Resolution- s344(a) & s81(1)(a)(i)
2. Failure to commerce or continue with business- s344(c)
3. Loss of capital- s344(e)
4. Inability to pay debts- s344(f)
5. Dissolution of external company- s344(g)
6. Just and equitable- s344(h) & s81(1)(c)(ii) & (d)(iii)
7. Conversion of voluntary winding-up to winding-up by the court- s81(1)(a)(ii)
8. No reasonable prospect to business rescue succeeding- s81(1)(b)
9. Termination of business rescue proceedings- s81(1)(c)(i)
10. Deadlock in management or voting- s81(1)(d)(i)-(ii)
11. Fraud, illegality or misapplication of company assets- s81(1)(e)(i)-(ii)
12. Failure to comply with compliance notice.- s81(1)(f)(i)-(ii)

Question 7

1. SPECIAL RESOLUTION s344(a) and s81(1)(a)(i):

Answer 7

the court may wind-up a company (solvent or insolvent) if it has passed the special resolution to be wound up by a court. s344(a) and s81(1)(a)(i)

Question 8

2. FAILURE TO COMMERCE OR CONTINUE WITH BUSINESS s344(c)

Answer 8

the court may wind-up a company if it has not commenced its business within a year from its incorporation, or if it has suspended its business for a whole year. s344(c)
-only applies to insolvent companies

Question 9

3. LOSS OF CAPITAL s344(e)

Answer 9

the court may wind-up a company if 75% of its issued shar capital has been lost or became useless for its business s344(e)
-only applicable to insolvent companies

Question 10

4. INABILITY TO PAY DEBTS s344(f)

Answer 10

the court may wind-up a company if it unable to pay its debts as described in s345 {s344(f)}
a company is unable to pay its debts if:
-a creditor who has a claim of less than or at least R100 due, and has placed in a demand in the company and it has been ignored for 3 weeks
-a warrant of execution is returned by the Sherriff with an endorsement that he could not find any disposable property sufficient to satisfy the claim
-it is proved to the court’s satisfaction that the company is unable to pay his debts

Question 11

5. DISSOLUTION OF EXTERNAL COMPANY s344(g):

Answer 11

the court may wind up an external company if it has been dissolved in the country in which it was incorporated, or ceased to carry on business, or is carrying on business only for purposes of winding-up its affairs. s344(g)

Question 12

6. JUST AND EQUITABLE s344(h) & s81(1)(c)(ii) & (d)(iii)

Answer 12

the court may wind-up a company if it appears to be just and equitable that the company should be would up. s344(h) & s81(1)(c)(ii) & (d)(iii)

Question 13

7. CONVERSION OF VOLUNTARY WINDING-UP TO WINDING-UP BY THE COURT s81(1)(a)(ii):

Answer 13

the court may wind-up a solvent company that has commenced a voluntary winding-up if the company applies for the winding-up to be continue by a court s81(1)(a)(ii)

Question 14

Parties who can apply for the winding-up of an insolvent company:

Answer 14

1. The company
2. One or more creditors
3. One or more of its members
4. Any or all of the abovementioned parties
5. The Master
6. A provisional or final judicial manager.

Question 15

WHEN THE COMPANY IS SOLVENT:

Answer 15

1. Special resolution- the company
2. Just and equitable- the company
3. Conversion of voluntary winding up to winding up by court- the company
4. Termination of business rescue- one or more creditors
5. Deadlock in management or voting-the company